FTX Creditors Cry Foul Over “Disastrously Low” Asset Valuations

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New York, NY – December 29, 2023 – A December 27 court filing revealed a potential flashpoint in the ongoing FTX bankruptcy saga. According to the filing, the now-defunct exchange is seeking court approval to estimate its customers’ digital asset claims based on their value on the date of FTX’s collapse, November 11, 2022. This proposal assigns prices of $16,871 for Bitcoin, $1,258 for Ethereum, $16 for Solana (SOL), and $14.19 for Avalanche (AVAX).

However, the proposed valuations have ignited a firestorm of criticism from FTX creditors. They argue that the prices significantly undervalue the digital assets, potentially shortchanging them on their rightful recoveries. Notably, Bitcoin and Ethereum have both rebounded dramatically since FTX’s implosion, trading at around $42,379 and $2,367 respectively as of this writing.

Influence of Founder SBF

The controversy raises crucial questions about the fairness and accuracy of using bankruptcy date valuations for customer claims. While it simplifies calculations and offers a fixed snapshot in time, critics argue that it fails to take into account subsequent market movements and potentially disenfranchises creditors.

Adding fuel to the fire, concerns have emerged about the potential influence of FTX founder Sam Bankman-Fried on the valuation process. Although officially stepping down as CEO before the exchange’s collapse, Bankman-Fried reportedly retains significant sway over FTX’s legal team and advisors. This has led some creditors to worry about potential self-serving manipulation of the valuation methodology in favor of FTX insiders.

Complexities of Digital Assets Bankruptcy Proceedings

The court’s ultimate decision on the valuation method could have a significant impact on the distribution of FTX’s remaining assets. While the judge may opt for the bankruptcy date approach, they could also consider alternative methods that factor in subsequent market changes or rely on independent pricing assessments.

With creditors gearing up for legal battles and the court poised to make a critical ruling, the FTX saga takes another dramatic turn, highlighting the complexities of navigating bankruptcy proceedings in the nascent digital asset space.

Author: Jinka

Jinka is a self-trained crypto journalist, passionate about happenings in the industry.